Can Credit Card Balances Be Negotiated?

If you've accumulated a mountain of credit card debt, it can feel like there is no light at the end of the tunnel. If you've fallen behind on your payments, it can exacerbate the sense of fear and hopelessness. Fortunately, you may be able to reduce what you owe and improve your overall financial situation through negotiation.

Lower Interest Rate

You may be bombarded with mail advertisements from credit card companies offering a low introductory rate if you transfer your balance from an existing card. Use these offers as a negotiating tool with your current company. Call the company and inform it of the offers and ask whether the company can match them. If the company agrees to lower your rate, you'll save money on interest charges and reduce your overall balance. If not, it may be time to make a switch, although you should first determine what the interest rate will be after the introductory period.

Payment Plan

If you've fallen behind on your credit card payments, contact your credit card company to see if you can set up a modified payment plan. The company may agree to lower your payments and the total amount you owe, employing the logic that receiving some payment is better than nothing at all if you were to file for bankruptcy. Be prepared to give a reason for your financial difficulties, such as a job loss. It's also important to take this step quickly before the company turns your account over to a collection agency.

Seeking Professional Help

If you're not comfortable with contacting your creditors or aren't having much success in your negotiations, consider seeking the assistance of a nonprofit credit counseling service. Credit counselors are trained in how to negotiate with creditors and they may be able to help you reduce your interest rates and set up a payment plan. They can also provide assistance in budgeting and money management.

Debt Settlement

Another option is to enter a debt settlement arrangement where you negotiate to pay off your account for an amount less than what you owe. You can enlist the services of a debt settlement company, although the Federal Trade Commission warns that many of these companies are ineffective and in some cases, unscrupulous. Settling your debt can also lower your credit score, and the amount of debt you eliminate is usually considered as taxable income by the Internal Revenue Service.